Nathan,
I do think that in general, the perception of a larger company gives consumers more confidence when choosing who to do business with. It is not that a one person shop is necessarily a bad thing, but from a consumer confidence perspective, you may choose to spend your money with a business that has signs of being stable. The number of employees you support, the larger the operation, lends itself to the belief that you are perhaps more legitimate and will be around for a longer period of time.
There are cases where the number of people within a business doesn't really matter. In the case of referrals for example. If I know a great baby sitter or a good mechanic who is a one man show, in those areas, the number of employees is less relevant to me because of the referral.
For a business with only one person, if they are trying to compete with other businesses of larger size, it is to their benefit to appear to be bigger than a one person shop. As I said, I think it helps instill confidence and legitimizes yoru company to a degree in the eye of a consumer.
Hope that helps!